Associated Banc-Corp Reports Q2 Record

Associated Banc-Corp (ASB 1.31%), the largest bank holding company based in Wisconsin, released its second-quarter earnings for fiscal 2025 on July 24, 2025. The most notable news from the period was a new company record for net interest income (GAAP) in Q2 2025, driving GAAP earnings per share of $0.65—above analyst estimates of $0.62. However, GAAP revenue came in lower than expected, partly reflecting muted noninterest income. Overall, the period showed strong commercial loan growth, solid capital metrics, and stable credit, but deposit outflows clouded the outlook.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Snapshot and Strategic Focus

Associated Banc-Corp operates as a full-service regional bank serving over 100 communities with 188 branches. It delivers a range of retail and commercial banking services, including loans, deposit accounts, wealth management, and specialized products for individuals, small businesses, and corporations. The bank is known for its strong Midwest presence, especially in Wisconsin, where it leads by total assets.

The company’s recent focus has centered on accelerating commercial loan growth, improving deposit mix, and managing risk. These efforts are supported by investments in customer experience and expansion across major Midwestern cities. Success factors include maintaining robust risk management, adapting technology for both growth and security, and complying with strict regulatory requirements.

Quarterly Highlights: What Drove the Numbers?

Net interest income, the difference between interest earned on loans and paid on deposits, hit $300 million. That represents the highest level in the company’s history and was up 17% compared to Q2 2024. The increase reflected growth in commercial and industrial (C&I) loans, along with disciplined management of interest-bearing deposit costs. Net interest margin, a profitability measure showing the yield on earning assets, improved to 3.04% in Q2 2025, up from 2.75% a year earlier.

Despite the milestone in net interest income, Consolidated revenue (GAAP) missed analyst forecasts. Noninterest income, which covers fees like wealth management, cards, and capital markets, rose just $2 million from a year ago (GAAP). Most of the increase in noninterest income came from rolling off a prior-period mortgage loss, rather than steady fee growth. Noninterest income growth, at just 3% year over year (GAAP), remains subdued and less diversified than some peers.

Commercial loan balances continued an upward trajectory. Period-end loans grew to $30.6 billion, up 3% year over year. Consumer lending stayed relatively flat, reflecting a deliberate shift away from lower-yielding residential mortgages. The bank highlighted expansion in Kansas City and ongoing momentum in core markets such as Milwaukee, Minneapolis, and Chicago. Management described checking household growth as the best in a decade, and a company-high Net Promoter Score of 55 in Q1 2025 pointed to solid customer satisfaction trends.

Deposit trends were mixed. Total deposits declined by $1.0 billion or 3% sequentially but remained up 4% from the same quarter last year. Core customer deposits, which exclude wholesale and brokered sources, also dropped 3% from the previous quarter (non-GAAP). Management attributed this reduction to seasonal outflows that typically follow healthy inflows in Q1. Noninterest-bearing demand deposits, which do not pay interest and are a source of cheaper funding for the bank, fell 5.8% on a period-end basis compared to the year before. The company reaffirmed expectations for core customer deposit growth, although it lowered total deposit growth targets for the year.

On expenses, total noninterest expense reached $209 million, up 7% from a year ago. The bank maintained a focus on efficiency, as evidenced by a fully tax-equivalent efficiency ratio of 55.8% (an improvement from 59.5%). Personnel costs increased, reflecting ongoing hiring and market expansion, while legal, professional, and FDIC-related costs also contributed to the overall rise.

Credit quality showed stable to improving trends. Provision for credit losses—the amount set aside for potential loan defaults—rose by $5 million from the previous quarter but dropped $5 million compared to last year. Nonaccrual loans, or those where borrowers aren’t paying interest, declined to 0.37% of total loans from 0.52% a year ago. Net charge-offs, which reflect loans written off as unrecoverable, increased to 0.17% on an annualized basis. The allowance for credit losses on loans increased slightly to 1.35% of total loans. The bank’s capital ratios remained healthy, with Common Equity Tier 1 capital at 10.2%, above regulatory minimums.

There were no major one-time events impacting results. The only notable non-recurring adjustment in fee income versus prior periods was the absence of a mortgage sale loss in Q1 2025. No new material dividends, buybacks, or extraordinary items were declared, although the board previously approved a quarterly dividend.

The main product families contributing to results remain commercial and industrial loans, real estate lending, and a growing presence in health savings account (HSA) programs. HSA accounts saw double-digit customer growth, but did not materially shift the revenue mix in the period.

Looking Ahead: Guidance and Watch Items

Management raised its outlook for net interest income, now expecting 14%-15% growth for the full year 2025. Guidance for noninterest income increased slightly to 1%-2% annual growth after adjusting for nonrecurring items. Noninterest expenses are projected to rise by 4%-5% after adjusting to exclude the $14 million impact of the loss on prepayments of FHLB advances recognized in the fourth quarter of 2024. Full-year loan growth is anticipated at 5%-6%, and total deposit growth guidance was trimmed to a 1%-3% range. The bank reaffirmed its target for core customer deposits, maintaining a forecast of 4%-5% growth. The effective tax rate guidance is unchanged at 19%-21%.

Key areas for investors to watch include the ability to retain and grow core deposits, and continued credit stability in the face of potential macroeconomic shifts. Management described its capital position as strong and intends to prioritize capital use toward business expansion rather than shareholder buybacks. No further details on future dividends were provided, and the quarterly dividend remains unchanged at $0.23 per share.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.